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Cryptocurrencies: Regulatory framework takes effect today. Check what changes

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Criptomoedas: Marco regulatório entra em vigor hoje. Confira o que muda

Cryptocurrencies: Regulatory framework takes effect today. Check what changes

The legal framework for cryptoassets comes into force this Tuesday. The text, sanctioned by former president Jair Bolsonaro at the end of last year, aims to define rules for the performance of cryptocurrency brokerages, known as exchanges, in addition to imposing punishments against possible fraud. Regulation is welcomed by both companies and investors, as it provides greater security to this market.

The body chosen to regulate, inspect and supervise the provision of virtual asset services was the Central Bank (BC). A public consultation should be carried out by the institution to understand the main desires of the market. Only after that, the BC will establish conditions and deadlines — of at least six months, according to specialists — for adequacy.

According to a decree signed by President Luiz Inácio Lula da Silva last week, the BC will still be responsible for authorizing the operation of exchanges and defining the financial assets regulated by Law 14,478/2022.

João Canhada, founder of Foxbit, believes that the regulator’s definition can encourage large institutions to actively participate in this market:
— Once fully regulated, we expect a significant increase in the institutional volume of Brazilian players. At this moment, the Brazilian government is at the forefront of hundreds of countries and regulatory processes in progress, being a mirror for all others.
In the view of new technology specialist Matheus Puppe, from the Maneira Advogados office, it is possible that the rules will lead the crypto market to suffer less from price fluctuations and speculation.

“As technology advances, laws and regulations must evolve in tandem to protect consumers and businesses as they take advantage of the opportunities that decentralized financial innovation has to offer,” says Puppe.

From now on, article 171 of the Brazilian Penal Code, which deals with embezzlement, now clearly includes the crime of fraud with digital currencies, with a fine and up to eight years in prison. The measure facilitates the punishment of people who use financial pyramids to deceive third parties and gain advantage.
The president of the Brazilian Association of Cryptoeconomics (ABCripto), Bernardo Srur, says that there was great expectation in the sector for the approval of the regulatory framework. For him, in addition to providing more security and transparency to digital asset negotiations, the new law promotes equality between Brazilian and foreign exchanges that operate in the country:

— Companies that are going to operate for Brazilians will need to comply with the legislation. In general, the law puts the same rules of the game for everyone, in a market that is highly dispersed – he opines.

As fees are already being charged, Cássio Krupinsk, CEO of BlockBR, assesses that the regulation will not imply additional costs for companies or for customers.

Potential to drive the market

Business Law specialist Yan Viegas Silva, from Silveiro Advogados, believes that regulation tends to encourage investment in the country, due to greater predictability of the limits and responsibilities of each player. He also expects fewer power struggles between entities, due to the prior delimitation between the competences of the Central Bank and the Securities Commission (CVM, the regulatory body of the capital market).

— Due to regulatory problems in other countries, it is possible that the legal security established with the new law will foster an attractive environment for new companies. In addition, supervision by the Central Bank can give more credibility to regularized exchanges and, as a consequence, encourage investor migration to this type of asset – he suggests.
Gustavo Blasco, CEO of the GCB Group, a financial and capital market holding company, agrees that more people can try investing in cryptocurrencies:

— This measure may attract new people interested in this asset class, especially those who were afraid of the lack of transparency and little supervision that existed in the market. Now, crypto assets are regulated and supervised by the most experienced agents in the market.

Unlike virtual currencies, such as Bitcoin, assets representing securities remain under the umbrella of the CVM, for example when forming a collective investment contract. The definition pleased the market, as lack of clarity has been an issue overseas.
In the United States, the Securities and Exchange Commission (SEC, the sheriff of the American market) sued Coinbase for acting as an exchange and broker without properly registering for such functions. This happened because some crypto assets were categorized as securities, and the exchange was not allowed to trade derivatives or other investments in the traditional financial market.

For Nord Research crypto analyst Luiz Pedro Andrade, the biggest concern is that the SEC increases the list of cryptos considered securities and also considers the most moving currencies, such as Bitcoin and Ethereum:

— Worrying movement regarding the evolution of the market in the country, since the United States is one of the most relevant countries for the volume of the crypto market.

There, the accusations are beginning to be seen as increasing pressure from American regulators against exchanges, making them think about leaving the country. Cryptocurrency exchange, for example, reported last week that it would suspend part of its US operations. Venture capital firm Andreessen Horowitz announced that it intended to open its first office outside the United States, seeing London as a more welcoming environment for crypto-asset entrepreneurs.

Lack of definition on asset segregation

However, the sector’s new rule left out something pointed out by specialists as essential for investor safety: a precise definition of asset segregation and how to implement it.

In theory, the money applied by each customer should be reserved and available for when he wants to withdraw or make any trade, but not all exchanges respect this and end up using the amounts for transactions for their own benefit. This was even one of the problems that affected other cryptocurrency brokerages in the past that came to collapse. Before filing for bankruptcy, FTX, for example, admitted that it did not maintain reserves to cover the applications of all investors.

Binance.US, which is part of the largest global cryptocurrency exchange, Binance, was accused this month by the SEC of transferring billions of dollars from customers to a bank account of a company controlled by the group’s founder, Changpeng Zhao. These funds would have been sent to third parties in order to buy and sell cryptocurrencies. The announcement sparked a rush to withdraw. In a 24-hour period, around US$ 790 million were withdrawn.

Although Binance reported that the issue did not affect Brazilian users, many were afraid and preferred to leave the exchange. Entrepreneur Guilherme Monteiro, 32, used to buy crypto assets on Binance. However, given the rumors, it has opted to make the purchase in other smaller companies. After converting the dollars into Bitcoin, transfer the funds immediately to your offline wallet, so you don’t take any risks.

“If you buy the coin and you can’t withdraw it, it’s just a promise. I buy and take off on the same day. I’m the custodian. It’s like I had a gold coin in my pocket,” he says.

The system, also known as a cold wallet, is recommended by digital security experts. Through a kind of pen drive, the investor manages to take his digital currency out of the hands of the brokerage, avoiding having the withdrawal prevented in the event of the company’s insolvency.

The photographer and partner of the producer aBodega, Nelson Saldanha, 34, who invested BRL 10,000 in crypto assets in 2021, also rushed to withdraw the amounts when he learned of the SEC’s accusation against Binance.US. Due to the devaluation of assets, he retreated when he saw that he would have a loss.

“Now, I am providing a hardware wallet to transfer my cryptos and not leave them in Binance custody,” he says.

According to Vanessa Butalla, executive director of legal, regulatory and compliance at Mercado Bitcoin, the exchange noticed an increase in the volume of crypto input in customer accounts. To seize the opportunity, the exchange released tutorials to explain how to transfer cryptos from other companies.

— We encourage the client to bring their funds here, ensuring that all their money is separated from the company’s assets – explains the executive director of Mercado Bitcoin.

Source: O Globo

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